I am always looking for a good deal, whether that means buying an extra box of Frosted Flakes when they're on sale or pouncing on undervalued stocks. The idea that anybody would sell a stock for less than its worth may seem silly, but legendary value investor Ben Graham tells us, by way of allegory, how we can look out for these situations.
In The Intelligent Investor, Graham introduces readers to a wacky guy named Mr. Market. Mr. Market's game is to pay you house calls on a daily basis to offer to sell you interests in businesses he owns or to buy from you interests in businesses you own. Sometimes Mr. Market will show up at your door very excited and offer you premium prices for your holdings, while at other times he'll be inconsolably depressed about the future and will offer to sell you what he has for as low as pennies on the dollar.
So to find some of the stocks that Mr. Market is depressed about, I've turned once again to The Motley Fool's CAPS investor community. Each of the companies below had been given a five-star rating (the highest) by our community of investors just 30 days ago:
|
Stock |
30-day Return |
One-year Return |
Current CAPS Rating |
|---|---|---|---|
|
Focus Media |
(33.7%) |
(37.4%) |
**** |
|
TBS International |
(29%) |
78.7% |
**** |
|
Yingli Green Energy |
(20.7%) |
53% |
**** |
|
ICICI Bank |
(16%) |
(20.8%) |
***** |
|
NVIDIA |
(16%) |
(22.3%) |
***** |
|
Sterlite Industries |
(13.9%) |
NA |
***** |
|
Ctrip.com |
(13.3%) |
28.3% |
***** |
Data from Motley Fool CAPS as of June 17.
As the table shows, these stocks are all still very well-regarded by the CAPS community despite their underperformance over the past month. While these are not formal recommendations, they could be a great place to kick off some further research. I'll even get you started with some thoughts on Rule Breakers pick Focus Media.
Why so blue?
The great thing about a growth stock is that when the company is hitting on all cylinders, the stock likely will be unstoppable. The not-so-great thing about a growth stock is that when the company hits a bump in the road, skittish investors often end up pulling a Tonya Harding on the stock.
A case in point is Focus Media, which operates an advertising network that reaches consumers through thousands upon thousands of outdoor LCD screens. Over the past few years, the company has been on fire -- and the stock has followed suit. Between the autumn of 2005 and late last year, the stock charged ahead nearly 500% as both revenue and profit at the company grew by leaps and bounds.
But then, last November, the company missed Wall Street's earnings target for the first time and investors started getting cold feet. A better report in March helped remind investors why they fell in love with Focus Media to begin with, but the company just couldn't keep the momentum going. In its most recent earnings report, adjusted earnings met expectations, but the company ratcheted down guidance because of the devastating earthquake that hit China. Investors once again lost that lovin' feeling and sent Focus Media's shares tumbling.
What the bulls say
A key tenet of Foolishness is to always keep the big picture in view and avoid getting too hung up on performance over a short time. And it's the big picture that has kept the CAPS community excited about Focus Media and has one fellow Fool saying there are 119,240 reasons to stick with the company.
And speaking of CAPS, 984 members of the community have an outperform rating on the stock, versus just 28 who think it will underperform. One CAPS player, fuzion23, became bullish on the stock earlier this month on the belief that short-term problems are creating a good buying opportunity: "The stock is oversold in my opinion. The earthquake is a short term problem. Their digital out-of-home and Internet advertising businesses continued to perform strongly in the first quarter and I believe that will continue."
So do you think the recent drop has created a good opportunity? Or is there more downside ahead? Let the community know what you think -- head over to CAPS and share your thoughts with the other 110,000-plus players who are part of the community. Even if you'd prefer to pass on Focus Media, you can check out a couple of the other stocks listed above, or any of the 5,500 stocks that are rated on CAPS.
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